PAR Says Session Missed Opportunities

June 19, 2006

Missed opportunity characterizes the 2006 Regular Legislative Session. At the outset, hopes were high that the state might finally be forced to reinvent and redesign some of its outmoded and inefficient policies and institutions. But, in nearly every function of state government, the legislature passed over the rare chance for meaningful debate and successful reform.

The state’s health care system continues to be inequitably applied and inefficiently delivered. The state’s higher education system continues to be top-heavy, redundant and arbitrarily funded. Teacher pay continues to be comparatively low and unevenly distributed. Ethics code exceptions for favored interests were multiplied, and efforts at reform were brazenly dismissed. To cap it all off, even efforts to add transparency to the state’s budget-making procedures were rebuffed.

Some steps toward better government were made with the hard-won passage of the New Orleans consolidation proposals. Another important highlight of the session was the final approval of spending plans for billions of dollars in federal aid for housing, infrastructure and economic development. The historic significance of this session will lie in the establishment of the largest public housing initiative in U.S. history – The Road Home. The mammoth task of building consensus among competing interests to win approval of the $8-billion, broadly outlined spending plan can be deemed a major accomplishment. However, the plan’s implementation will present a much greater challenge than its most basic development.

Another point of pride for the session could be the legislature’s demonstration of some level of budgetary discipline by not chipping away at the funding for projected hurricane evacuations and future FEMA bills. But, the usual budget-making gamesmanship marred even these successes. Very little of the welcome “extra” revenues estimated for next year was set aside for other prudent but uncelebrated expenditures like paying down debt. Rather, a spending frenzy was enjoyed by both the House and Senate as local projects were sprinkled throughout the budget in the form of line item amendments. It was said that those who did not get their projects in the budget could blame it on their weak lobbyists.

The Good

The first steps toward consolidating New Orleans’ seven assessors were successful.

The concerted efforts of the governor, dedicated legislators, government reform groups and concerned citizens achieved the first important step toward reforming New Orleans’ seven-assessor system. Post-Katrina calls for uniform assessments, cost-cutting and greater transparency proved strong enough finally to overcome years of political inertia. The major battle was fought and won in the House Ways and Means Committee, which had killed a similar measure in a close vote during the prior special session. SB 141 received overwhelming support in both the House and Senate. Because the assessor offices are protected in the constitution, the consolidation proposal will have to pass statewide and in New Orleans in the November election. The current assessors would serve out their terms because the proposal would not take effect until 2010.

A bill streamlining the New Orleans’ courts, clerks’ and sheriffs’ offices passed.

Resistance from local elected officials and some legislators failed to stall a bill streamlining the court system and sheriffs in New Orleans. SB 645 will phase in the merger of several elected offices within the city’s civil and criminal courts and the civil and criminal sheriffs. The court system, with nearly twice the number of judges as other parishes, will be merged in 2009. The juvenile court will be added in 2015. The proposal would abolish the recorder of mortgages, register of conveyances and custodian of notarial archives and fold their duties into the clerk of court’s office. The criminal and civil sheriffs will be merged by 2010. A strong effort to condition the merging of offices on the passage of a city referendum failed.

The state’s housing recovery plan was approved.

The Louisiana Recovery Authority and the legislature settled on a plan to spend $8.1 billion of federal community development block grant funding to address the housing problems left in the wake of the storms. Following a series of public hearings, adjustments were made in response to complaints, and the plan was passed by the legislature and submitted to federal officials for approval.

The Road Home housing redevelopment effort is of unprecedented scope. Louisiana will serve as a national laboratory in public policy as this aid is distributed to homeowners, landlords and developers. Timely passage of a spending plan agreeable to the various interest groups who voiced their discontent with original plans was crucial to winning final approval from Congress for a contingent $4.2 billion. The action taken this session set the stage for successful implementation of this enormously complex endeavor.

The Bad

Impetus for reform was dashed by revenue estimate.

The May revenue estimate that added an additional $759 million to the budgets for the current and coming fiscal years dashed all hopes for a post-Katrina and Rita right-sizing of state government. Cuts made based on initial dire predictions for the 2007 budget were restored. Not only were state departments and agencies spared, but the excess revenues even spilled over into a proliferation of local projects added by member amendments.

The urban and rural slush funds that were eliminated by the Governor as a post-Katrina and Rita belt-tightening reform in expectation of a lean year ahead were easily supplanted by line-item local projects. The legendary, budgetary back-scratching embraced as legislative tradition continues. The Governor will have to use her line-item veto power if the spirit of the slush fund reform is to survive.

The lone effort at harnessing member amendments was HB 967 that would have required certain basic information to be provided about entities that would receive state funds through amendments to the budget bill. Only those entities that were neither budget units nor political subdivisions of the state would have had to provide the information, such as legal name, taxpayer identification number and proposed use of the funds. But the move was dismissed as too burdensome a mandate.

Other bills to fix long-standing problems with the budget process also were rejected. SB 486 would have required the executive budget to contain explanations for the policy changes resulting from budget adjustments in order to more clearly disclose state priorities. Tying the budget to policy in explicit terms is important for transparency and accountability. Without the statutory requirement to do so, however, any administration is free to report only the policy developments it can comfortably disclose.

The administration opposed the bill on the grounds that the requirement would add too much complexity to the budget document, making it too long to be useful. The bill was killed just before its final stage of passage by referring it back to a committee that was no longer meeting.

A separate bill would have streamlined the arcane capital outlay categories. SB 474 would have reduced the number of funding categories from five to two, so it would be clearer which projects would be funded and which were on the back burner. The bill never made it out of the Senate.

A resistance to reforming the budget process persists, in spite of the grumbling by legislators whose projects are out of favor. Perhaps if the budget were as lean as initially projected, more support for increased transparency and accountability could have been generated.

Health care reform was essentially ignored.

The most obvious missed opportunity for reform is in the area of health care where debate was stymied and poor policy was enacted. The state’s budget for health care next year is propped up with hundreds of millions of dollars in non-recurring revenues to be used to cover recurring expenses. To make matters worse, budget cutting flexibility for future years was restricted by the passage of SB 613, which marks a huge victory for the nursing home industry and a pitiful failure for Louisiana.

The bill embedded in law the formula used to determine nursing home reimbursement rates. Payments to the favored and highly profitable nursing home industry will be on the chopping block if health care reform ever really gets underway in Louisiana. But, chopping has been made more difficult now by limiting the Department of Health and Hospitals’ (DHH) options for reducing payments for things like the growing number of unoccupied beds.

A Senate resolution to establish the Louisiana Healthcare Redesign Collaborative may turn out to be a step toward system-wide health care reform, or it may simply become another impotent study committee. HCR 127 established the 37-member collaborative as an advisory body to the Louisiana Department of Health and Hospitals (DHH) charged with developing recommendations and plans for the redesign of the health care system. The collaborative will work in conjunction with the Louisiana Recovery Authority and the U.S. Department of Health and Human Services (HHS) Secretary Michael O. Leavitt. It remains to be seen whether the collaborative will be able to reach consensus on the appropriate direction for health care redesign and whether DHH will have the muscle to implement any recommendations that are generated.

Hope is not high. DHH missed a valuable opportunity to force the charity hospitals into some level of accountability for their uncompensated care payment requests. The department laudably developed a means to shift some uncompensated care payments from the charity hospital system to the private hospitals that have picked up tremendous post-Katrina caseloads. A new system was developed so that the dollars for private hospitals would follow the patients. But, the charity hospitals will continue to receive around $800 million in uncompensated care payments without having to provide patient-specific documentation.

With such a high level of destruction to the health care infrastructure in southeast Louisiana, it seemed that the storms finally had forced the state into meaningful debate and choices about how to redesign its system of care for the uninsured. But, the legislature managed to avoid that political minefield by creating yet another study committee to examine the issue and delay the decisions. Meanwhile, plans to rebuild hospitals are being hatched and inefficient funding mechanisms are being preserved.

Statutory protection for the inspector general’s office was rejected again.

The inspector general’s office provides a strong monitoring and auditing presence within the executive branch but operates without statutory authority. HB 832 sought to cure this deficiency and strengthen the office by giving it statutory protection. Although the office has been continued under successive governors since it was created by executive order in 1988, PAR has supported a statutory IG office accountable to an independent board rather than the governor with expanded investigative authority and powers. In a repeat of last year’s action, the right of the IG to release reports without the governor’s approval was again the proposal’s undoing. A House committee with the support of the administration rejected the bill.

Access to records of agencies within the governor’s office remains closed.

HB 1171 sought to make dozens of state entities that are housed within the governor’s office subject to the public records law. After several hearings on the proposal, it was rejected by a House committee at the urging of the administration. Although it is the current governor’s policy to make the records of many agencies available to the public, transparency in government should not rest on the vagaries of politics. Without statutory clarification, citizens may be forced to bear the high costs of suing to gain access to certain public records.

Politics trumped policy on teacher pay.

The legislature went along with the Governor’s proposal to give a $1,500 across-the-board pay raise to teachers. The increase may inch salaries for Louisiana teachers closer to the southern regional average. Unfortunately, by giving each teacher the same raise, the state skewed equity across school districts and missed an opportunity for innovation.

The raise appeared in the MFP resolution, but it was not subject to the formula’s calculations for equity. As a result, some districts will receive more than they are due under the formula, while other districts will receive less than they deserve. This raise maintains – rather than reduces – the gap between the highest and lowest paying districts.

The uniform raise also failed to create incentives for teachers to fill positions in districts, schools or disciplines with teaching shortages. A targeted approach to compensation could move the state’s average teacher pay closer to the regional average while also addressing inequality and staffing shortages. An across-the-board raise, on the other hand, generates greater constituency support by allowing politicians to take credit for giving everyone a little extra.

Comprehensive structural reform for higher education was ignored.

The structure of higher education in Louisiana is in need of serious overhaul, but any hopes for reform this session were thwarted. Louisiana operates an excessive number of higher education institutions haphazardly arranged under four independent governing boards. This approach leads to unnecessary redundancy and inflated costs. The Board of Regents lacks the authority necessary to develop and enforce a comprehensive design for higher education. Although two bills were filed to require consolidation of higher education governance under a single board, they did not move through the legislative process. This was a missed opportunity for open debate on the best form of higher education governance for today’s Louisiana. Instead of facing the tough issues of reorganization, consolidation and downsizing, the legislature ignored the need to move toward a cost-effective, reform-minded system.

Flexibility for the higher education boards to set tuition and fees was not provided.

HB 910 would have given the LSU Board of Supervisors the authority to increase operational fees by $150 per semester. That policy would have been a small but significant step toward providing institutions with more flexibility to raise revenues. The bill failed to pass committee. Institutional governing boards do not have the power to increase tuition and fees. Contrary to accepted practice in other states, tuition and fee increases require a two-thirds vote of the legislature in Louisiana. The result is that Louisiana institutions are funded well below the southern average for their comparable peer institutions.

New exceptions were carved out of the ethics code.

Legislators continued to pass new exceptions that chip away at the ethics code. Although several bills were fairly narrow in scope and tailored to the needs of rural parishes, they weaken laws designed to prevent impropriety and the appearance of impropriety in various governmental activities. One such exception, HB 1239, passed this session will allow the members of planning and zoning commissions that act in an advisory capacity to governments with populations of less than 50,000 to recuse themselves from voting when they may have a conflict of interest. Current law requires members to resign from the boards, because recusal does not cure the potential influence the member may have on other members.

The growing list of exemptions in the ethics code needs to be examined in a comprehensive way. There may be circumstances that warrant an exception to balance the state’s need for a strong ethics law and the particular needs of a community or public entity. But those exceptions should be carefully crafted with a sunset provision to force a timely review. A strong ethics code backed by consistent enforcement is critical to improving the state’s image and fostering a business friendly environment supportive of economic development.

The Ugly

The House refused to consider a ban on public officials having recovery contracts.

A proposal that would have decreased the appearance of impropriety in large recovery contracts received shabby treatment on the House floor. Shortly after hurricanes Katrina and Rita, contracts worth millions of dollars were awarded by federal, state and local authorities outside of the public bid law. Allegations of wrongdoing already have occurred and investigations by state and federal authorities are ongoing. HB 1236 would have prohibited elected and appointed state officials, their families and businesses from having contracts related to hurricane recovery or rebuilding. After receiving unanimous approval in committee, the full House twice rejected motions to debate and vote on the bill. Without a ban, public officials and their families can continue to participate in highly lucrative contracts and feed the negative image of the state.

Legislature refused to give up free tickets.

In a year when many of the state’s citizens have had to endure life-altering sacrifices, the legislature failed to give up one of the prized perks reserved for elected officials. SB 382 would have eliminated an exception in the ethics code that allows legislators and other elected officials to accept free tickets to sporting and cultural events. After barely surviving a House committee, the bill was postponed indefinitely to end debate on the proposal and to avoid a vote. Instead of sending a small signal that business as usual was a thing of the past by passing the bill, House members chose to keep the free tickets that foster the appearance of favoritism toward powerful interest groups.

Benefits for former legislators were increased.

Legislators elected after 1995 who have at least 10 years of service will be allowed to continue receiving health and life insurance benefits after leaving the legislature. HB 1028 requires the state to cover 75 percent of their premiums. Originally the bill called for the state to pay 38 percent – the same portion the state pays for retired state employees. But in the final stages of the session, the bill was amended to increase the state share of the premium to 75 percent. To push through such a self-interested bill in the last, frantic days is inexcusable.

In 1996, voters prohibited new legislators from receiving retirement benefits. This bill may violate the spirit of that constitutional amendment.

Conclusion

The 2006 Regular Legislative Session was a chance for the state to seize upon the opportunities for reform presented by the hurricanes of 2005. To political outsiders, it seemed that long-awaited improvements in health care, ethics and education might finally be embraced by those who once favored the status quo. But, news that revenues were on the rise allowed inertia to prevail and change to be avoided for entrenched interests.

The legislature’s limited successes this session will be determined by progress yet to be made in the areas of consolidation of redundant public offices in New Orleans and implementation of the Road Home housing program. Failure to even initiate reform in other important areas is an embarrassment to the state as it struggles to overcome its poor reputation. Other embarrassments like failing to ban cockfighting, hijacking bills and ignoring legislators’ conflicts of interest surely will be remembered as shining examples of Louisiana’s cherished laissez-faire approach to governance even in times of crisis.

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Constitutional Amendments

Voters will be asked to make decisions on 21 amendments this year. There will be 13 amendments on the September 30 ballot and 8 on the November 7 ballot. PAR will publish its Guide to the Constitutional Amendments for each election to outline the arguments for and against each proposal. Copies will be available at www.la-par.org.

The legislature approved 14 of the 90 proposed constitutional amendments introduced this session. Of those, the amendments to be considered on the September 30 ballot would: restrict when the government may take private property (SB 1); amend the procedure for taking private property (HB 707); limit the state’s liability when taking property for hurricane protection and flood control projects (SB 27); extend the homestead exemption to property placed in revocable trusts (HB 389); allow public universities to invest a portion of endowment funds (HB 345); authorize the investment of a part of the Medicaid Trust Fund for the Elderly (HB 406); change the procedure for filling a vacancy in certain statewide elected offices (HB 716); make changes to the Louisiana Coastal Restoration Fund (SB 229); heighten judges’ qualifications (HB 13); and limit the legislature’s ability to pass unfunded mandates onto local school boards (SB 296).

The amendments to be considered on the November 7 ballot would: consolidate the seven assessors in New Orleans (SB 141); create the Central school system (HB 48); provide for the creation of specialized courts (HB 206); and increase funding to parishes through severance taxes (HB 714).